“E-Commerce Business Models”

E-commerce Business Models

Introduction

The ecommerce business entails buying and selling products and services on the internet. E-commerce has increasingly transformed how enterprises interact with each other, governments, and consumers (Radovilsky, 2015). The complexity and development in the ecommerce sector have led to increased demand for companies to develop business models that will help create value in ecommerce. Therefore, this paper will focus on different ecommerce business models that are used to increase competitiveness and create value in ecommerce businesses. Ecommerce Business models can be categorized into business to consumer, business to business, consumer to consumer, consumer to government, government to business, and government to citizen (Lapidus, 2018). Understanding business models is important for organizational purpose and entrepreneurship since they affect the possibility of value capture and value creation.

A business model is a set of planned business processes and activities to create value and profit. Business models include a captivating-value proposition to the consumers and achieving valuable risk and cost structures. Business models are expected to help a business to deliver its services and products in line with the captured value (Foss & Saebi, 2015). Business models have four interlocking elements, known as the Four Box Model, which include customer value proposition, key processes, profit formula, and key resources. Successful business models have consistent elements that complement each other.

Business to Business Model

An ecommerce business following the business-to-business model sells its products to an intermediate business that sells the product to the final consumer. Companies allow interested parties to learn about their products through their websites and initiate contact. In the case of the business-to-business model, companies allow other businesses to search for their products online and initiate sales through e-procurement interfaces (Shahjee, 2016). For instance, wholesalers may place an order on a company’s website where the order is fulfilled, and after receiving the products, they sell the end product to the consumer through their retail outlets. Business-to-business ecommerce can be classified into horizontal and vertical approaches. The vertical approach entails selling to businesses within a specific industry, while the horizontal entails selling to businesses across myriad industries. Ecommerce storefronts have replaced the order sheets and catalogs thus improving targeting in business-to-business selling in ecommerce (Nanehkaran, 2013). Business to Business ecommerce sites such as Alibaba, Amazon Business, and AliExpress has acted as intermediary-oriented and horizontal marketplaces where they sell the product to an intermediate buyer who sells the product to the consumer.

Business to Consumer Model

Business to consumer model in ecommerce entails selling the product directly to the consumer (Iqbal, Hunjra, and Rehman, 2012). This is also known as retail ecommerce. Company websites have adopted this model to make the purchase process shorter. In the business-to-consumer model, customers can view the product on the company website, choose the product and order the product again. The website notifies the buyer of the purchase via email after receiving the order and once the order has been dispatched to the consumer. The short sales cycle has been utilized by companies to spend less on marketing and has fewer recurring orders than B2B (Lakshmi et al., 2020). Companies have leveraged on business to consumer model technology such as mobile apps, social media platforms, and websites to directly market to the consumer and make their lives easier. Online retailers have relied on this model to make sales over the internet and give buyers and sellers the freedom and comfort to make transactions anytime.

Consumer to Consumer Model

The consumer-to-consumer business model in ecommerce is also known as an online marketplace where consumers connect with other consumers to exchange products and services. The online marketplace makes money through listing fees and charging transactions. The consumer-to-consumer business models benefit through propelled growth motivated by sellers and buyers but face a major challenge in quality control. Craigslist, Walmart, and eBay are examples of businesses using this commerce model. Consumers can sell their assets such as motorcycles, property cars, residential cars, or rent rooms by publishing information on the websites.

Consumer to Business Model

Consumer to a business model in ecommerce enables consumers to sell products and services to businesses. In this case, a website can be used to enable consumers to post the task they want to be completed and have a business bid for an opportunity. Most affiliate marketing service businesses have relied on this model (Menaka & Seethal, 2018). This gives the consumers the power to name the prices and have businesses directly compete to meet consumer needs. Upwork is a common ecommerce platform that connects organizations to talent and individuals selling services. The consumer-to-business ecommerce model has given consumers and businesses mutually beneficial connections.

Business to Government

Business to Government model allows for selling and marketing products, information, and services online to local, state, and federal agencies. Through this ecommerce business model, corporations bid for contracts through online platforms such as websites. Unlike the business-to-consumer transactions in ecommerce, the government agencies do not directly go to the ecommerce website to place the order, but companies typically bid for projects after the state agencies have announced Requests for Proposals.

Government to Business

Government-to-business models allow governments to approach businesses through online platforms. These online ecommerce platforms support tenders, auctions, and application submissions. The government offers information and services to business organizations (Veit et al., 2014). For instance, the government can contract websites that offer services such as auctioning machinery and vehicles, which reduces the time for fulfilling citizens’ requests in various government services.

Consumer to Government

Citizen to government model in ecommerce focuses on transactions between consumers and the government. When the consumers offer feedback or service that adds value to the authorities or government administration. For instance, the citizen can interact with the government on areas such as taxation, or a consumer can pay their GST or tax online.

Government to Consumer

The government-to-citizen model of ecommerce entails the government using websites to approach citizens. The main objective of the government-to-consumer model is to lower the average fulfillment time to the consumer for different government services. This links the government and residents or private residents (Wirtz et al., 2016). For instance, these platforms enable the citizens to participate in the decision-making process and activities performed by the government by the consumers. Citizens and government agencies benefit from this model, especially in deploying government projects.

Conclusion

In summation, an ecommerce business model is an approach that an organization takes to offer products and services online to remain profitable. Different types of ecommerce businesses rely on varying ecommerce models that enable them to have a better position in the market and effectively reach their consumers. Successful execution of an ecommerce business model can become a significant source of value in an ecommerce business.

References

Foss, N. J., & Saebi, T. (Eds.). (2015). Business model innovation: The organizational dimension. OUP Oxford.

Iqbal, S., Hunjra, A. I., & Rehman, K. U. (2012). Consumer intention to shop online: B2C E-commerce in developing countries. Middle-East Journal of Scientific Research, 12(4), 424-432.

Lakshmi, P., StalinDavid, D., Kalaria, I., Jayadatta, S., Sharma, A., & Saravanan, D. (2020). Research on collaborative innovation of E-commerce business model for commercial transactions. Turkish Journal of Physiotherapy and Rehabilitation, 32(3), 787-794.

Lapidus, L. V. (2018). Digital economy: e-business and e-commerce management. Moscow, Infra-M, 30.

Menaka, B., & Seethal, K. (2018). Recent trends in e-commerce. Shanlax International Journal of Commerce, 6(S1), 40-44.

Nanehkaran, Y. A. (2013). An introduction to electronic commerce. International journal of scientific & technology research, 2(4), 190-193.

Radovilsky, Z. (2015). Business Models for E-Commerce. Business Expert Press.

Shahjee, R. (2016). The impact of electronic commerce on business organization. Scholarly Research Journal for interdisciplinary studies, 4(27), 3130–3140.

Veit, D., Clemons, E., Benlian, A., Buxmann, P., Hess, T., Kundisch, D., … & Spann, M. (2014). Business models. Business & Information Systems Engineering, 6(1), 45-53.

Wirtz, B. W., Pistoia, A., Ullrich, S., & Göttel, V. (2016). Business models: Origin, development and future research perspectives. Long range planning, 49(1), 36-54.